Zero VAT on Solar, Heat Pumps,
and Insulation
Why It Matters and What It Means for You
From soaring energy prices to soaring temperatures, you don’t need to look far for reasons to invest in renewable energy, but Rishi Sunak’s 2022 Spring Statement had one extra reason to make the switch.
The UK government’s Spring budget statement promises to reduce “the VAT on energy saving materials such as solar panels, heating pumps and roof insulation from 5% to zero for 5 years.” That means from April 2022 through to 2027 you won’t have to pay VAT on the installation of new solar panels, heat pumps, or other qualifying energy-efficient systems.
How Will the Zero VAT Impact You?
The Chancellor gave a good approximation of potential savings stating that “a family having a solar panel installed will see tax savings worth over £1,000 and savings on their energy bill of over £300 per year.” Of course, these numbers depend on how much your installation costs, your current energy costs, the energy efficiency of your home, and the weather where you live. But that VAT reduction will mean real savings even sooner if you’re planning on installing a qualifying system.
If you choose a qualifying solar system you could also benefit from the Smart Export Guarantee (SEG). This government-backed initiative “requires some electricity suppliers to pay small-scale generators for low-carbon electricity which they export back to the National Grid.” In essence, you could get cash back by ‘selling’ your excess energy back to the grid.
Looking beyond solar panels, the zero VAT incentive also affects the installation of air and ground source heat pumps. Even if your heat pump system isn’t connected to a solar setup, you’ll still see significant savings compared to oil and gas heaters, not to mention an overall more efficient way to heat your home.
Don’t Forget to Ride the BUS
The government’s VAT reduction on renewables isn’t the only financial incentive they’re offering to help encourage people to move to renewables. The Boiler Upgrade Scheme (BUS) is a grant paid by the government to help homeowners upgrade their boiler to one that has lower carbon emissions. With the Boiler Upgrade Scheme there will be a simple initial payment to help lower the cost of the installation for a qualifying low carbon heating system. The scheme is offering capital grants of up to £6000, so make sure you find out more about this when you’re considering a heating system upgrade.
The team at Trusted Energy Solutions have the experience and knowledge to help you choose the right system for your home.
